Though the mix of demand and scarcity of rare earths is enough to position companies involved with the sector as a ‘Buy,’ the Trump Administration’s latest move regarding USA Rare Earth Inc (NASDAQ: USAR) positioned the stock as almost a mandatory buy.
Specifically, President Donald Trump is planning to take a 10% stake in the mining and manufacturing company as part of a $1.6 billion deal between the firm and the Federal government.
The revelation of the deal turbocharged USAR stock, leading to a 37.26% rally in the overnight session. Should the press conference USA Rare Earth scheduled for the morning of Monday, January 26, confirm the bullish details, the agreement could solidify the equity as a top performer in early 2026.
Notably, USAR shares have been rallying even before the latest announcement and are up 75% in the year-to-date (YTD) chart, having risen from $14.15 on January 2 to $24.77 at the latest closing bell. At press time at dawn on January 26, USA Rare Earth stock is changing hands at $34.
Why USAR stock is a strategic investment
The Trump Administration’s decision to invest in USA Rare Earth comes after China arguably decided to weaponize its position as the world’s biggest supplier of rare earth minerals amid the resurgent global trade war by placing export restrictions.
Such a move has led the U.S. to scramble to find an alternative, considering the basket of elements is critical in various cutting-edge industries such as renewable energy, automobile manufacturing, fossil fuel refining, iron, glass, and magnet production, as well as in the military-industrial complex via their use in the production of missile-guidance systems, etc.
One of the more recent examples of the effort to secure alternative sources of rare earth came in the form of President Donald Trump’s drive to acquire Greenland.
Specifically, the island is home to the world’s largest untapped rare earth elements deposits, and some observers have argued that Washington is eying the region for mining, rather than military uses.
Why USAR stock might not continue rocketing
Elsewhere, it is worth noting that USAR is not guaranteed to continue rallying. Despite operating in a critical sector and receiving government backing, its previous regular and extended session rallies might have sent it into ‘overbought’ territory, precipitating at least a temporary correction.
Another potential risk vector is that, despite President Trump claiming the U.S. has reached an agreement with the rest of NATO pertaining to Greenland that would not require Denmark to relinquish sovereignty over the island, critical figures from Europe have denied knowledge of the deal.
Lastly, companies backed by the Trump Administration have been known to collapse in value, nonetheless, with Intel (NASDAQ: INTC) being the latest example, with its 17% crash in the January 23 session.
Featured image via Shutterstock
